Property Market Crash?

dh and I have been talking about the world economy and wondering if the property market will crash in Australia. We know that in America things are really bad and thousands of people have had to sell their home at a fraction of what their home loan is so now are without a house and still owe the bank a stack of money :o we have friends over there who are also in that boat :( Anyway I was wondering if any BB'ers had thought about this issue and what you had concluded? We built our house about 3 years ago and we love it! But we also know that this is only house #1 and would eventually like to be on acreage and be able to put a big pool in :dance: soooo we are thinking of selling now and renting and then if the market does fall we can buy some land cheaper and build our 'dream' home. There are lots of pros and cons either way I guess but the idea of having so much more money to spend every fortnight is also VERY attractive! We are comfortable and don't really 'want' for anything much but to know that I can just spend more money instead of thinking that I don't really need it would be very liberating!

It's definitely headed that way. Things here are taking 2 years to sell and it's ridiculously cheap here in tassie compared to the other states. Our home has been on the market for nearly year a we've dropped the price by $25,000 from what we paid for it 18 months ago.

My SIL has her house on the market in Pomona (qld) and it's a beautiful house - no buyers.

My mum has a great block of land for sale in peachester (just under an acre) for the same amount of time as ours has been and relatively cheap at $269,000 - and yet again - no bites.

Its definitely pretty crap in the market at the moment and I don't see it picking up any time soon.

Hey hon, how are you going? what a bummer about your house taking so long to sell. I remember that you are from the sunny coast. Our house is in Cooroy in a great location, since we've lived here there have been a few neighbouring houses sell, some for much less than what we would want to sell for but then again our house is on the high side of the street and has more internal features in it. Hmmm I wonder if we should put it on the market and just see if there are any buyers. I wonder what real estate fees would be involved. I was just looking on a real estate website and the property market has dropped stacks from when I look a few months ago :o Now I'm wondering if we should just hold onto the house? :think: we can service the loan no worries so maybe we should just ride out the storm... oh what to do, what to ??

Yeah, I think it's pretty clear the market in on a downhill spiral. Some suburbs are still performing well but as a whole, most areas are starting to hurt. We are in Perth and it's had a 7.5% slump in the past year. That's huge.

We are counting our blessings we sold our last house (which we built - walking distance to Fremantle - and had been in for only a year) at the tail end of the boom as our friends in the same area are struggling to sell their home. Just 2 years ago, they would have had people putting in ridiculous offers over the asking price BEFORE the home opens. Yes, it was that nuts over here. They've actually just taken their house off the market as it's been 5 months with only one offer and they need a break for a bit.

As you say, there would be pros and cons to selling now. You could definitely snap up a bargain in the near future BUT you also run the risk of selling your current house at a loss. It's such a gamble at the moment.

One of my close friends lives in Melbourne but her and her future hubby are going to move to the Gold Coast in a year or so. They've just bought a 4x2 with a pool close to the beach (5 minute walk) and only 10km north of Surfers. They paid $540K :o - $100K under the initial asking price. Admittedly it was a deceased estate but seriously, that seems crazy!

Perth definitely needed a shakeup in my opinion. It was so over inflated over here and while I'm grateful that it worked in our favour on several occassions, it has made it difficult for a lot of people and now the big slump is only making things worse. It will be nice to see the houses more afordable over here but it's sad that so many families, in particular, will be (or have already been) hit hard.

Thanks Taurean, we don't need to sell so we wouldn't let our house go at a loss. We would be happy enough to make a much smaller amount though or even break even as our 'win' would come from having so much extra money in our bank account, being debt free and being ready to buy when our dream bit of land shows itself. I think I've decided to put it on the market and see what happens. Not sure what the real estate fees would be but will find out tomorrow. Another bonus for us is that we could rent much closer to dh's work, at the moment it's a 30 min drive. Seeing I am not going back to work there is no need to be where we are now. Gosh so much to think about!

Sounds like a good plan and it can't hurt to see if there are any 'takers' out there :)

We moved to our current house (which we are actually knocking down early next year to build again - woohoo!) so we are much closer to DH's work too. We only a 15 minute drive in traffic (each way) instead of 40 minutes. We are in an even better suburb now too and plan on staying here - hopefully forever!

We can't remember exactly how much our agent fees were but we think it was around 2.5% and the only thing we paid for prior to the sale of our house was advertising fees of around $2K. We had a full coloured 'For Sale' sign out the front of our house which displayed beautiful photos (taken by a professional photographer) and details of the house. The agent also had gorgeous full colour brochures for clients and our house was on realestate dot com with loads of great photos. We were really impressed with what was included in our advertising costs and have no doubt it helped to sell our house faster (we sold in 6 weeks) and for our asking price :D

I'm watching the prices in my area drop quite substantially over the last 6 months, from a terrace going for about $1.5mil to down to the $1mil mark. One in my street was on the market for a couple of months, I honestly thought a 4 bedroom, 2 bathroom, 2 car park terrace less than 5kms from the CBD would be snapped up quicker. The amount of time it was on the market is pretty unheard of according to the long time locals that I chat to.

I'm watching the market, would like to buy in the next 6-12 months but that is dependant on a few things.

It dropped really quickly last year, we first talked about selling in July and by the time it was on the market in September we had to drop 60k off the asking price. It turned out ok as we bought in the same area so got this house for a lot less, we sold quickly but this house was on the market for 6 months and with three agents. The owner had over capitalized on the renovations so she barely made any money, she wanted a lot more but no one was prepared to pay it.

what happened in the USA will not happen here, the issue over there was to do wtih banks lending 100% loans etc...over there you can simply work away from a mortgage if you wish, our economy is great in comparision and the fact that interest rates are steady is a good sign. i think the key is buy in the right area

I second what Olive said. In the UK it was similar in that a lot of people had borrowed 110% of their property value which meant when property prices dropped a little, it had a huge knock on effect on the economy. America and UK were also in recession which they are still struggling with. Australia managed to avoid the recession and whilst prices may drop a little in the short term I do not believe they will have an almighty crash.

I was going to same the same as Olive - the property and mortgage market is completely different in the US.

I think it entirely depends on where you bought/live. Inner affluent suburbs in Melbourne (such as Toorak etc...) have seen a massive drop in prices to sell, whereas out this way houses are barely on the market and sell ASAP. A house around the corner from us had been previously bought approx. 2years ago and was on the market for months, it sold last month within 2 weeks of being on the market.... A general thought is that ppty prices will overall hold and there will be no crash (that is in Victoria anyway)

I also second what Olive said. What America did was CRAZY! They went for the whole 'every american deserves a home' stance and I think lots of people were mortgaged 3 or 4 times over what their house was worth. Lehmen Brothers, Franny Mae and Freddy Mak (the institutions that collapsed and kicked off the financial crisis) were pretty much set up by the gov't to give Americans any amount of credit they wanted regardless of whether they could pay it back or not. It was a stupid stupid economic move. Of course those institutions collapsed because people couldn't afford to pay the money back and once they feel over, so many other banks panicked and did the same thing. They all wanted their money back and people couldn't afford it which meant there was a massive surplus of houses which is why houses were selling for as low as $7000. There were just so many that people couldn't afford and the market was flooded. I don't see things becoming that dire here because we have lending laws that protect us.

Also in America, people can walk away from their houses without having to pay the money back or taking any responsibility for their mortgage. This is a huge difference as well.

Interest rates in America were also very low (less than 1%) and the UK was the same. When the GFC hit, they had nowhere to go with interest rates which is why they suffered so badly with it and why their property and lending markets did as well. Australia, thankfully, had interest rates around 4% (from memory) but we had room for our interest rates to go down which is what kept our heads above water. We are still above water now.

Some economists have been predicting a second GFC though based on what happened - because America has continued to borrow and borrow and borrow. George Bush, as president, borrowed more money than all the presidents before him combined and Barak Obama has borrowed more than George Bush and all the other presidents combined. It is some phenomenal amount everyday with no way of paying it back. It is kind of scary. But our interest rates seem okay and the Reserve Bank is trying to keep inflation under control (even if the ALP is trying to drive up inflation to pay back Australia's astronomical debt) but we should be okay if another GFC hits.

I think the property market will suffer a little, but I don't think it will crash. I would say that it is not a good time to be selling and to hang onto your property if you can afford it. Ride it out and things will even out with wages/cost of living/economy in a few years.

Anyway, there is a little video (about 40 mins) that explains it all. I will see if I can track it down and put up a link. It is really really interesting.

Okay - found this video. It's not the one that I was thinking about that explains about the american government involvement but it does explain the american housing market and if you watch it, you can probably see why we are not at risk of things crashing.

It is a bit slow to start with but it is very informative and to the point ... ‪Global Financial Crisis Explained‬‏ - YouTube

we have our house on the market at the moment, so i have given this alot of thought. the market at the moment is super ****e.

we bought our house three and a half years ago, we were 19, it was going to be our starting point so we could do it up a bit and sell for a bit of a profit and then build our dream home. We gutted it, pulled out lino and replaced with tiles, put in a new kitchen and bathroom, repainted EVERYTHING, added a patio with decking front and back, a 6x6 shed with extra concrete bit to add on a lean too if we ever wanted to, bore with automatic retic, solar hot water system, split system heating and a wood fire and put up a new back fence.

all up we have probably made $50,000 worth of improvements (but it was more like $30,000 as we did alot of the stuff ourselves so cut out labour costs). When we got the real estate agent to valuate, he valuated it only $10,000 more than what we paid over 3 years ago, after all those improvements. We have ended up putting it on the market at a price that allows us to get our money back that we spent and break even (so we aren't out of pocket, but we haven't gained anything either), and we're crossing our fingers tight that someone loves it enough to pay that much. I don't know if it will completely crash here, But yes, the property market isn't pretty at the moment and it hurts.

The market here and in the US, Uk & Canada is a repeat of about 20+ years ago. Droves from overseas were walking away from their homes due to the the money market. Interest rates 30+ years ago here were 17+% and it was hard paying off a house on those rates. It took a few years to turn around and for interest rates to drop.

I think in the next few years we will see the same thing happen here again where prices rise and jobs are few. Things seem to go in circles. As there is talk of interest rates going down in the next few month and stamp duty changed you will see more buyers around.

the market will only crash if a lot of people have no option other than to sell for any price they can get. Most vendors are selling because they want to move not because they are out of options.

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the market will only crash if a lot of people have no option other than to sell for any price they can get. Most vendors are selling because they want to move not because they are out of options.

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this is true. we're selling beacuse we need a bigger house, we're hoping to build.

still a right PITA tho ><;

Thanks for all your input girls. Lots on interesting points. Re 100% loans, Australia totally gives 100% loans and then offers credit cards with loads of credit. There are hundreds and thousands of Australians in debt up to their eye balls and my mind always boggles as to how they are managing to pay their bills and live the lifestyle that they are living. The answer is they are living off of credit which is growing and they are digging an even bigger hole. Then there's loads of other people who are only just scraping by and as the cost of living increases (which it is and will continue to do) wages just don't increase as much. Banks, laws and governments are not there to protect us and to make sure we all live within our means I can assure you of that. So yeah I believe that there will be loads of people who will need to sell their houses and they may not get what they paid for it, they will be lucky to even break even. The property market is declining and I can't imagine it will get back to where it was any time soon and people will start to feel the pinch. So that is why we would like to sell. We'll be happy to break even at this point and where the market is at here I'd say that we can manage that. Then we can rent and when prices fall even more and then start to rise we can buy again and hopefully get an even better place with a smaller home loan over all.